Do the Right Thing

ALAN MURRAY:The nation may not have a national energy plan, but Google does. Why are you doing it?

ERIC SCHMIDT: Because energy matters. And the way you solve the environment problem is you solve the energy problem. From a Google perspective it's the right thing to do for the world. It's also good for our business because we're in the information business. And a lot of the energy solutions involve a lot of information.

MR. MURRAY:But that would have to be a pretty small part of your overall business, energy information.

MR. SCHMIDT: Well, but we're happy to make money everywhere.

It seems to me that we're in a situation where you've got to get out and take a stand. So we talked about it, and [Google founders] Larry [Page] and Sergey [Brin] talked about it a lot, and Larry's had an interest in this for a very long time. We need to take a stand. We'll put up a proposal, and you can shoot at us, but at least we put up a proposal and at least you can judge us based on what we said.

MR. MURRAY:One of the early speeches you gave on this was in September. I pulled something up off the Web where people were commenting on it. A shareholder says, "I don't want Eric Schmidt out there talking about green-energy investments. I understand they consume a lot of energy but that doesn't address the top line, it has a marginal effect on earnings. Don't do it." What do you say to shareholders who say this isn't the way you should be spending your time?

MR. SCHMIDT: The shareholder value in a company is created at the end of everything you do. You create shareholder value by serving your customers, building a great business, and if you do a great job your stock will go up. So they're not first in the discussion point. What's really first at Google is about changing the world, in a positive way. Can we make a difference? In our case, we're huge energy users, so a relatively straightforward solution to our energy costs goes right to the bottom line.

What the Plan Calls For

MR. MURRAY:Let's talk about the specifics of the plan. You set a target date of 2030 to get utilities totally off carbon fuels.

MR. SCHMIDT: That's correct. It's easier if I make the argument this way. You've got to solve a whole bunch of problems. You've got to solve the energy-generation problem, and you've got to solve the transportation problem. So when you add it all up, if you make, in our view, the right assumptions and you invest in the right ways, you end up saving money. That's the thing that was most surprising to me.

So the rough numbers are, we need about $3.5 trillion of investment over 22 years, as opposed to over three months, and we generate on a cost basis a savings of $4.4 trillion. If you invest in the right way, you can make money by doing this. And the way you do it is you've got to figure out a way to install the renewable energy and the distribution network to get it to consumers, and you've got to address the energy-efficiency issues with respect to cars.

MR. MURRAY:Let's start with the renewable energy, the utility piece of it. Your 2030 plan takes renewables to like a third of our energy sources, up from 1% or 2% now.

ENLARGE

Eric Schmidt
Genesis Photos

MR. SCHMIDT: What we did is we kept the current sources of power roughly constant, because you figure they're not going to be turned off. In particular we kept nuclear at its current absolute number.

MR. MURRAY:You don't want more nuclear in your plan?

MR. SCHMIDT: Our plan does not require more nuclear, and it also does not require it to be turned off, which is important.

[One of] the assumptions we made is that you would enact essentially a renewable portfolio standard and constant energy efficiency which, on a per capita basis, has been achieved in California since 1973. If you look at per capita use of energy in the U.S., it has gone up over 30 years, largely due to regulatory issues, in our view.

MR. MURRAY:I don't want to leave utilities yet because it's really the notion that we can, between now and 2030, go from well under 1% wind power to a huge percentage, 10%, in your plan. And solar from very small percentages.

MR. SCHMIDT: Wind is, on a kilowatt-per-hour basis, roughly similar to the cost of coal after the subsidies it gets today, and without the subsidies it's a couple cents higher per kilowatt. So that's pretty good. It's the one that's closest now to being a free substitute for coal, which is the most common power source that we all have.

The issue, of course, is the wind doesn't blow in the places where the people are. So in order to make these systems really work, you also have to have the grid technology. And the problem with the grid is it takes two years to get the line built and eight years to get the permits. I'm not making that up, by the way. So you fundamentally have to establish either federal rights of way for these things or other incentives that cause the utilities to actually be able to build these power plants.

MR. MURRAY:So the federal government has to say we can site these transmission lines where we need to.

MR. SCHMIDT: That has been discussed. The Obama administration has already indicated very strong support for a federal renewable portfolio standard. An alternative if that does not get through -- and I suspect it will get through -- is that you can imagine incentives at the state level where, if two states have RPS's, they can basically build these lines quicker with federal help.

The arguments that we make do not work unless you solve the problem that the wind blows in the middle part of the country from north to south, and by the way there's a tremendous amount of wind, and the sun shines primarily in the deserts and heats up the ground for enhanced geothermal.

MR. MURRAY:That's critical, you have to do that.

A Call to Action

In breakout discussion groups, the participants in the ECO:nomics conference set priorities for the country in six energy-related areas:

BIOFUELS

Adopt a federal requirement for low-carbon fuels and for gas stations to install pumps for biofuels.

Experiment with a wider variety of feedstocks to make biofuels.

WATER

Collect better data on water supply; conduct audits on water use and charge "true" prices for water.

MR. SCHMIDT: Absolutely critical. If you look at the rate of improvement of solar photovoltaic and solar thermal, they are behind wind but they're going to get there. It's remarkable how quickly they're moving.

MR. MURRAY:And do you see a distributed plan? Are you talking about me putting solar panels on my house or are you talking about centralized solar power-generated facilities?

MR. SCHMIDT: All solutions ultimately are distributed. One of the errors that we have is that we have a patchwork of economics and incentives that distort what is an obviously correct model, which is distributed power. And you want people to be able to generate and send power back into the grid. In fact, it's becoming possible to have a real business of generating power and sending it to the utilities.

A Future for Coal?

MR. MURRAY:And why not clean coal? Why not carbon capture, why not take advantage of the technologies that can make coal plants cleaner?

MR. SCHMIDT: First of all, there's a lot of great progress in carbon capture and sequestration. I don't use the term clean coal because I think it's misused.

MR. MURRAY:Because you don't think coal is clean?

MR. SCHMIDT: If we're going to talk about coal, I'd like to talk about it in the context of its CO2 load as opposed to the other particulates that clean coal typically represents. So the fundamental problem is that coal, which is the most prevalent source of energy in the U.S. and China, generates too much CO2. It really does contribute to global warming.

Now, one answer to that is that you have a carbon tax or a cap-and-trade system. I am skeptical as to whether those are going to happen simply because they have the wrong words in them -- taxes and prices and so forth.

There are many, many people who believe that they're the right answer, but I think politically we have to act as though those will occur but not anytime soon. We assume carbon capture and sequestration will work, but we assume that it will take a fairly long time for those systems to be prevalent enough.

I should say that we're having a U.S.-based conversation here, but we can solve all the problems in the U.S. and get them right and we can still die as a society, basically because of the issues in China and India.

And so we have to solve the efficient-car problem in the U.S., but it's even more important to establish it at lower price points in developing countries, which is where most of the cars are going to get sold. Now, maybe you start in the U.S. and you learn from that and you scale from there. These need to be global solutions.

MR. MURRAY:I have seen you say in other venues that you stepped into this gap because you felt there was an enormous lack of leadership in the U.S. on energy issues. Do you still feel that?

MR. SCHMIDT: Obviously, the administration makes a huge difference, and President Obama, then candidate Obama, had indicated a very strong support for renewable energy. And I think with politicians you want to judge them based on what they do, not what they say. The stimulus bill that was passed had $50 billion of renewable investment.

MR. MURRAY:Is it in the right places as far as you're concerned?

MR. SCHMIDT: It's good enough. Given that the government is two months old, they did a good job.

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